If one were looking for a case study in "creative destruction" – the economist Joseph Schumpeter's term for the messy way in which capitalism renews itself – then the current row over Uber, the internet-powered taxi-hailing service, would be hard to beat.
Launched in 2010 in San Francisco, it initially specialised in enabling subscribers to order, via a mobile phone app, a "black car" (usually an upmarket saloon) to pick them up from their location. Payment is by credit card, with the driver keeping around 80% of the fare and Uber the remainder.
Like all venture capital-funded enterprises (it's had more than $400m, or £240m, in VC funding and is currently valued at $3.5bn), Uber needed to grow and so it has diversified, mainly by offering access to a variety of vehicles and by expanding overseas. At each stage in its evolution, it has faced opposition from the entrenched commercial interests – taxi cartels and municipal licensing authorities – that it threatens to disrupt. But until recently the opposition has been relatively restrained.
Last week, however, a Brussels court raised the stakes by banning Uber on the grounds that its fleet does not have the necessary licences to operate in the city.
Uber drivers will be fined €10,000 if they are caught carrying private passengers. The judgment provoked predictable howls of outrage from technology enthusiasts such as Neelie Kroes, the EU commissioner for digital matters. "This decision," she told the Financial Times, "is not about protecting or helping passengers – it's about protecting a taxi cartel."
This may well be true, but it's not the whole story. The taxi business has been tightly regulated for a long time.
In London, for example, regulation goes back to 1654, when parliament first approved a measure to impose some order on "the late increase and great irregularity of Hackney Coaches and Hackney Coachmen in London, Westminster and the places thereabouts".
In succeeding centuries and in cities throughout the globe, municipalities followed suit and – as often happens – cosy relationships between regulators and their clients calcified into powerful vested interests.
The result is an industry that is sometimes run for the convenience of providers as much as for consumers.
In many locations, licences are expensive to acquire (it costs $1m to get a licence to run a yellow cab in New York), so anything that threatens to undermine the value of that medallion is bound to face serious opposition.
Consumers see the effects of this in high charges, erratic availability, indifferent service and regional discrepancies. Why should taxi fares in Liverpool, for example, be half what they are in the south-east?
Uber is disruptive in various ways. It could vastly increase the availability of taxis by enabling people who have acceptable vehicles and a desire to augment their incomes to provide a service. (Much as Airbnb enables householders to earn money from their spare bedroom or, indeed, their entire flat.)
It can also introduce dynamic pricing as a way of evening out demand – charging more at peak periods and less in the off-peak hours. And it provides real-time information on the location of cars.
On the other hand, taxi services are regulated for good reasons, chief among them passenger safety. A world in which just anyone with a car in an urban area could pick up passengers from the street or their homes is not one that most of us would countenance.
The best strategy for taxi firms and regulators, therefore, would be to learn from the mistakes of other industries (think record companies and print newspapers) that could have harnessed the internet for their own purposes, but chose not to do so until it was too late.
Uber – or similar services – is here to stay. It offers some ways of improving an important public service. Given that the taxi industry can't beat it, the smart thing to do would be to join forces with it – and keep some of the additional revenues.
